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Abstract. Bankers and other financial experts have analyzed the value of automated
teller machines (ATM) in terms of growing consumer demand, rising costs of technology
development, decreasing profitability and market share. This paper presents a step-by-
step cost-benefit analysis of the ATM automatic deposit service. The first step is to
determine user attitudes towards using ATM automatic deposit service by using the
Technology Acceptance Model (TAM). The second step is to determine location
priorities for ATMs that provide automatic deposit services using the Analytic Hierarchy
Process (AHP) model. The results of the previous steps enable a highly efficient
application of cost-benefit analysis for evaluating costs and benefits of automatic deposit
services. To understand fully the proposed procedure outside of theoretical terms, a real-
world application of a case study is conducted.
Key words: automatic deposit service, ATM, Technology Acceptance Model, Analytic
Hierarchy Process, cost-benefit analysis
Received: September 23, 2014; accepted: March 18, 2015; available online: March 30, 2015
DOI: 10.17535/crorr.2015.0020
1. Introduction
Today, with the availability of numerous new technologies banks are able to
offer new services to their customers. One of such services is the automatic
deposit service provided by Automated Teller Machines (ATMs) [27]. The
automatic deposit service entails depositing funds into an account where bank
notes are placed into an ATM while the money counter recognizes the
banknotes. After validation, the approved amount is automatically credited to
account. According to the research conducted by RBR, the automatic deposit
service is the fastest growing banking technology [13]. The expectation is that
∗
Corresponding author.
by 2018, the number of installed ATMs providing the automatic deposit service
will total 670,000 [14]. NCR, one of the largest manufacturers of ATMs
worldwide, has predicted that traditional envelop-based deposits will disappear
from the market by 2019 [25]. Other research conducted in the U.S. indicates
that the use of the automated deposit service has resulted in some financial
institutions in the United States increasing the number of deposit transactions
at ATMs by up to 50 % within the first six months of introducing the service
[14].
One of the reasons for the rapid development and implementation of
automatic deposit services is its lower cost. Making deposits at the counter or at
the ATM using envelopes costs $1.82 according to the Tower Group, whereas
the same transaction for the automatic deposit services at an ATM costs 58
cents, meaning a difference of $ 1.24 [14]. In addition, financial institutions
believe that introducing the new service has improved customer relationships
due to greater convenience and accessibility and which has ultimately led to
greater customer satisfaction and greater satisfaction for financial institutions.
2. Research overview
Bankers and financial experts have analyzed the value provided by ATMs. The
research has focused particularly on the growing demands of clients, along with
the rising costs of technology development and a decline in profitability in
relation to the changes in the market share.
According to the research conducted by RBR, the number of installed
ATMs in 2013 totaled 2.5 million. The increase in number of ATMs is expected
to slow down in North America and Western Europe while in the CEE and
M&A it will continue to rise by 10% a year [16]. However, according to this
research, there has been a global downward trend in newly installed ATMs.
Increasing the efficiency of ATM positioning requires a more detailed analysis of
user preferences and offered information technology services [17].
The financial effectiveness of ATMs can be increased by bringing
investments into line with into line the requirements of potential users of
automated deposit services. This trend imposes the logical need to analyze site
selection based on user trends.
This paper suggests optimizing the financial performance of financial
institutions in line with user preferences and ATMs positioning for providing
automatic deposit services using a combination of methods. The model for
determining the efficiency of automatic deposit services can be divided into
three main steps as shown in Figure 1.
Cost-benefit analysis of the ATM automatic deposit service 257
Figure 1: The main steps for determining efficiency of automatic deposit services
Usefulness
H3
H1
Usage intention
H2
Ease of use
Figure 2: A hypothetical model for assessing user attitudes towards automatic ATM
services in the future
Once the assessment of user attitudes towards using ATM automatic deposit
services has been done, the question relating to the optimal ATM site remains,
given that the location is crucial in determining whether the ATM will fulfil its
role or not, i.e. used for transactions or not. Increasing the return on investment
in automatic deposit services depends on the choice of location where the ATM
is to be installed. Since the ATMs were initially placed indoor on branch
premises, various studies conducted to ascertain the best possible location for
opening a new branch [18, 17, 11, 8]. Aldajani and Alfares [3], who also suggest
determining the optimal number and position of ATMs, have proposed
application of a heuristic algorithm. However, according to the same authors,
this seems rather complex for managers to use practically.
In this paper, the Analytic Hierarchy Process (AHP) [20] was used to
determine an appropriate location. The AHP method has already been used in
different ways within the banking sector [21, 18] including selecting bank
locations.
Formulating the AHP model required defining objectives, criteria, sub-
criteria and alternatives. The goal of this model is to rank potential sites for
ATM positions, from the best to the worst locations based on predefined
criteria.
Based on the author’s long experience in working with ATMs as a bank
employee and his responsibility for supporting and maintaining an ATM
network, as well as his expert knowledge and available literature on determining
locations for new branches [17, 18], three sets of technical, socio-economic and
competition criteria were evaluated. In all, there were 12 sub-criteria.
Technical criteria:
• ATM placement – The ATM is placed indoors (of branch premises) or
outdoors.
• Infrastructure – Each ATM device requires a constant power source and a
permanent connection with the parent bank, and a data line with
specifications to ensure connectivity. This is achieved using data cables or
via a GSM connection. A line should also be provided for the alarm. Finally,
the ATM is to be physically installed. The installation depends on whether it
is installed in a wall, glass pane, hallways or outdoors, which requires
anchoring to prevent physical removal of the ATM. All these prerequisites
must be fulfilled prior to putting an ATM into operation.
• Access – This relates to technical criteria determining choice of location, and
takes into account whether the respective location is close to major roads, a
public transportation system, and whether car parking is available.
260 Ivica Županović, Marko Hell and Dino Pavlić
Socioeconomic criteria:
• Population - This criterion relates to the number of residents gravitating
towards the ATM location. The greater the number of inhabitants in the
micro-area of the ATM, the greater the possibility the AMT will be used. In
evaluating this criterion, the population of Split segmented into districts was
used.
• Number of legal entities nearby - Besides the employees of these legal entities
who are potential customers, a geographical density of entities ensures a
certain fluctuation of people visiting them, they too are potential users of
ATM services.
• Fluctuation of people – The fluctuation of people in a given area is one of the
socioeconomic criteria. The greater the fluctuation, the greater the chance
that someone will withdraw cash or GSM vouchers, seek account information
or some other ATM service.
• Degree of urbanization - This sub-criterion indicates whether the location is a
city, suburb or rural settlement.
• Need for cash – The need for cash criterion in a particular location depends
primarily on the type of commercial amenities in the area, i.e. retail outlets.
In Croatia, cash payments are still the most common form of payment,
especially for smaller amounts.
The result of this step are ordered and prioritized (alternative) locations
based on the above criteria.
It has already mentioned that over 90 % of all deposits are made over the
counter of branches of financial institutions. In year 2010, out of the total
number of deposits, 40.02 % were personal, while 59. 98 % were corporate
deposits, which can be seen in Table 1. It is evident that target users for
automated deposits are both physical and corporate subjects.
The results suggest that for the future intention of using the automatic
deposit service, the most important factor is usefulness, followed by the very
simplicity of the service.
The behavior of the independent variables (average ease of use and average
usefulness) in terms of the criterion variable (usage intention) was determined
by conducting multiple regression analysis on the results of the questionnaire
once correlation analysis confirmed the correlation between individual constructs
on usage intention of the automatic deposit service.
The multiple regression coefficient R=0.656 indicates a strong degree of
correlation, with the coefficient of determination R^2 equivalent to 0.430. In
this case, the independent variables explained 43% of the dependent variable.
Moreover, the predictor variables predicted significantly the criterion
variable where F (2.208) = 78.529, and p <.005, meaning that the regression
model represented the data quite well. The form of multiple regression equation
is ANK = 0.312 + 0.559 + 0.424 * AK * AJK.
Also worth mentioning is that the AJK and AK coefficients were
significantly different from 0 given that p = 0.000, which is less than 0.05.
Accordingly, the higher the ease of use, the greater the usage intention. The
same applied for usefulness of the service.
The most popular recently used multiple criteria method is the Analytic
Hierarchy Process (AHP method). One of the main reasons this is so is its
flexibility and ability to adapt to the majority of those using the software
package ExpertChoice. The method was developed by Thomas Saaty in 1970.
Solving complex decision-making problems using this method requires
dismantling the following components [21]:
• Goal
• Criteria and sub-criteria
• Alternatives
For the purpose of this paper, ATMs previously installed in 39 locations in
Split and operating were considered as alternatives. Each of the alternatives
was evaluated using expert knowledge on each criterion and sub-criterion.
Evaluation of sub-criterion alternatives is shown in Figure 3.
264 Ivica Županović, Marko Hell and Dino Pavlić
The interesting thing about these first five locations is that the first four
locations are where the ATMs were installed indoors (inside of branch
premises), thus contributing to such a high result, while the ATM on Location
23 was installed outdoors (outside the branch premises).
The results provided by the software tool ExpertChoice 2000 are also
shown in the sensitivity analysis. The analysis performed to see how possible
changes in input data affect output results. Changing the weight of one criterion
using the performance option in the sensitivity analysis tool caused other
criteria weights to change in proportion to the initial weight. The left side of
Figure 6 shows the shares of certain sub-criterion while on the right there are
alternatives for initial weight criterion. As can be seen, the best alternative is
Cost-benefit analysis of the ATM automatic deposit service 265
If the population criterion increases from the initial 20% to 44%, the
alternative location ATM-7 becomes the best location followed by location
ATM-10. Other alternatives also experience location changes, as shown in
Figure 7.
Changes to the value of one criterion or sub-criterion can significantly
change relations at the same level of the hierarchical structure, thus different
what-if scenarios can be visually displayed along with the impacts of criterion or
sub-criterion changes to the ultimate goal.
Of the 10 locations, 6 were located inside the branch, and four were located
externally.
Properly calculating cost effectiveness required taking into consideration
the fact that that particular financial institutions had a dominant role relative
to other financial institutions. Therefore, this led to an increase in the number
of transactions at ATMs from 50 to 70 transactions per ATM per day with the
percentage of ON-US transactions increasing to 90% of the total number of
transactions. Furthermore, the number of deposit transactions increased from 4
to 8 in the first year of service introducing the service.
266 Ivica Županović, Marko Hell and Dino Pavlić
4. Conclusion
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Cost-benefit analysis of the ATM automatic deposit service 267
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